Willis Group Holdings has completed a new $600 million loan that allows the company to exit from debt associated with its earlier leveraged buyout and establishes a platform for growth. "This transaction will allow us to exit all our LBO debt, which is expensive and restrictive," said Ian Warner, group treasurer. The credit will also give the company room to reposition as an investment-grade credit, he explained.
Willis was upgraded to BBB- by Standard & Poor's in September and is working toward receiving the corresponding investment grade rating from Moody's Investors Service. "We've changed from having an LBO look about us to having an investment grade look about us in really three years. We wanted to preserve the momentum that we developed," said Warner. The proceeds of the new loan can also be directed toward $370 million of 9% notes that are callable in February.
The credit is unsecured and holds terms characteristic of an investment grade agreement. Other advantages of the new credit include the flexibility for growth--the credit does not amortize until the end of year three--and the flexibility for acquisitions. The loan will also help the company save about $15-20 million on interest per year. The new credit comprises a $450 million term loan and a $150 million revolver. Both the term loan and the revolver carry an initial spread of 95 basis points over LIBOR, but that could change depending on certain changes in the company's leverage and credit ratings. Willis' previous loan was structured as a $450 million term loan and a $150 million revolver. But that credit was done on a secured basis and carried spreads on average of 21/2-3% over LIBOR.
Bank of America, Citigroup, J.P. Morgan and The Royal Bank of Scotland lead the loan. Warner explained that the banks are all close relationship banks. "We were attracted to the [mandated lead arranger] panel. It gave us a significant start to the syndication process. We could leverage the best of each of the banks' proposal to come together with a term sheet that we felt was attractive," he explained. Warner noted that the company is concerned with maximizing shareholder returns, but also wants to maintain a good relationship with the debt capital markets. Willis was taken private in 1998 by Kohlberg Kravis Roberts & Co. and completed an initial public offering in 2001.